RBI frees branch expansion for large gold-loan NBFCs, easing prior approval rule
Kolkata: Non-banking financial companies, such as Bajaj Finance and Muthoot Finance, that offer gold loans are expected to benefit as the Reserve Bank of India (RBI) allows them to open branches freely.
Cholamandalam Investment and Finance Company, Mahindra & Mahindra Financial Services, Shriram Finance and Tata Capital Financial Services are among the other companies expected to benefit from the RBI decision Friday.
"There is a need to provide operational flexibility to the NBFCs for branch expansion while ensuring necessary compliance," RBI said.
To date, investment and credit companies (NBFC-ICC) engaged in the business of lending against gold collateral with over 1,000 branches were required to obtain prior RBI approval for opening new branches.
"In view of the comprehensive prudential and governance framework applicable to NBFC-ICCs, it is proposed to dispense with the requirement of prior approval for opening branches by such NBFCs," the RBI said in a statement accompanying the latest credit policy review.
To dispense with prior approval for branch expansion for large gold-loan NBFCs will allow more management bandwidth to be devoted to credit delivery and risk management, Shriram Finance executive vice chairman Umesh Revankar said.
RBI however said that these companies as well as housing finance companies would need to take prior approval for opening representative offices abroad. However, offices outside India can't offer loans.
"The representative offices can be set up abroad for the purpose of liaison work, undertaking market study and research but not for undertaking any activity which involves outlay of funds," the central bank said.
The parent NBFC need to get periodical reports about the business undertaken by the representative offices abroad. If the representative offices do not do any activity or such reports are not forthcoming, RBI may advise them to wind up the establishment.
Meanwhile, the central bank said that deposit-taking NBFCs including HFCs which are eligible to accept public deposits and having net-owned fund more than Rs 50 crore and are AA rated, can open a branch or appoint agents anywhere in the country. However smaller deposit taking NBFCs with lower credit rating can only open a branch or appoint agents within the state where their respective registered office is situated.
Cholamandalam Investment and Finance Company, Mahindra & Mahindra Financial Services, Shriram Finance and Tata Capital Financial Services are among the other companies expected to benefit from the RBI decision Friday.
"There is a need to provide operational flexibility to the NBFCs for branch expansion while ensuring necessary compliance," RBI said.
To date, investment and credit companies (NBFC-ICC) engaged in the business of lending against gold collateral with over 1,000 branches were required to obtain prior RBI approval for opening new branches.
"In view of the comprehensive prudential and governance framework applicable to NBFC-ICCs, it is proposed to dispense with the requirement of prior approval for opening branches by such NBFCs," the RBI said in a statement accompanying the latest credit policy review.
To dispense with prior approval for branch expansion for large gold-loan NBFCs will allow more management bandwidth to be devoted to credit delivery and risk management, Shriram Finance executive vice chairman Umesh Revankar said.
RBI however said that these companies as well as housing finance companies would need to take prior approval for opening representative offices abroad. However, offices outside India can't offer loans.
"The representative offices can be set up abroad for the purpose of liaison work, undertaking market study and research but not for undertaking any activity which involves outlay of funds," the central bank said.
The parent NBFC need to get periodical reports about the business undertaken by the representative offices abroad. If the representative offices do not do any activity or such reports are not forthcoming, RBI may advise them to wind up the establishment.
Meanwhile, the central bank said that deposit-taking NBFCs including HFCs which are eligible to accept public deposits and having net-owned fund more than Rs 50 crore and are AA rated, can open a branch or appoint agents anywhere in the country. However smaller deposit taking NBFCs with lower credit rating can only open a branch or appoint agents within the state where their respective registered office is situated.
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